The stock market crash serverely weakend the nation's banks in two way's. In 1929 bank's had loaned up to 6 billion dollars to stock speculators. Second, many banks invested in depositors' money in the stock market, hoping for higher returns. When stock value crashed banks lost money on their investments, and speculators defaulted on their loan's. The goverment did not insure bank deposits, so if a bank collapsed, customers, including those who did not invest in the stock market, lost their savings. Some depositers made runs on banks, causing banks to collapse. Because of all the bank runs the banks didnt have enough money to stay in business. More than 10 percent of the nation's banks closed, this is nearly 3,500 banks by 1932.
The stock market crash serverely weakend the nation's banks in two way's. In 1929 bank's had loaned up to 6 billion dollars to stock speculators. Second, many banks invested in depositors' money in the stock market, hoping for higher returns. When stock value crashed banks lost money on their investments, and speculators defaulted on their loan's. The goverment did not insure bank deposits, so if a bank collapsed, customers, including those who did not invest in the stock market, lost their savings. Some depositers made runs on banks, causing banks to collapse. Because of all the bank runs the banks didnt have enough money to stay in business. More than 10 percent of the nation's banks closed, this is nearly 3,500 banks by 1932.